VoIP Providers Targeted in Rural Broadband Fund

Voice over IP service companies will have to pay into the Universal Service Fund (USF) in order to accelerate the rural rollout of broadband services, if a bill pending in the U.S. Senate becomes law.

The USF currently provides financing for broadband networks only for schools and libraries.

Originally designed to expand telephone service to rural and underserved areas, USF payments go to high cost areas to create rates reasonably comparable to those charged in urban areas. Consumers foot the subsidy through their telephone bills.

Currently, local telephone companies, long distance companies, wireless providers, paging firms and payphone companies are required to contribute to the USF. Carriers providing international services must also contribute to the USF.

The system, according to bill sponsors Gordon Smith (R-Ore.) and Byron Dorgan (D-N.D.), creates inequities and incentives for companies to avoid contributing to the fund. Cable companies providing Voice over IP services, for instance, do not pay into the USF.

Under Smith's and Dorgan's legislation, contributors to the USF will be expanded to include "to the greatest extent possible" all services that are capable of supporting two-way voice communications.

The bill also authorizes up to $500 million a year from the USF for broadband buildouts to unserved areas. The legislation keeps control and administration of the USF in the hands of the Federal Communications Commission (FCC).

"High speed Internet has become an essential tool at home, the workplace and the classroom," bill co-sponsor Gordon Smith (R-Ore.) said in a statement.
"The expansion of broadband services allows students, business and consumers in previously unserved communities to pursue the new opportunities provided by the instantaneous exchange of information."

Dorgan added that broadband accessibility is no longer an option for communities.

"It's rapidly becoming a fact of life that in order to be competitive, business and industry simply must have it," he said. "Increasingly, individual consumers are also demanding it. Our bill would help make access to such service a reality in areas that otherwise would get left behind."

Prior to 1996, only long distance companies paid into the USF. Congress expanded the number and type of companies contributing to the fund in the
1996 Telecommunications Act.

"We believe believe all Americans -- rural or urban -- should have access to high speed Internet service," Dorgan said.